L.A.’s Must-Attend Event of the Season: The U.S. China Film Summit, 11-5-15


By Robert Cain for China Film Biz

October 26, 2015

U.S. China Film

Here’s an important heads-up: the sixth annual U.S.-China Film Summit, North America’s biggest and best annual gathering of Hollywood and Chinese filmmakers and industry executives, will take place on November 5th at downtown L.A.’s Dorothy Chandler Pavilion. Since its inception the Summit has grown bigger and more influential each year, and with this year’s exceptional slate of panels and speakers it’s an absolute must for anyone participating in or planning to join the booming cross-Pacific movie trade.

From senior executives at established film companies, like IMAX, Bona Film Group and Universal Pictures, to innovative film-technology entrepreneurs, the Film Summit’s speakers will offer unmatched insight and market intelligence on the U.S.-China film industry.

Panel topics at the Film Summit will include:

  • The China Wave: After a year of headline-making deals, what’s the outlook for Chinese investment in Hollywood, what new forms may it take and will China’s market turbulence affect companies’ global appetites?
  • Frontiers in Content: New avenues and models for U.S.-China collaboration, from cutting-edge digital technologies and gaming-inspired story development to theme parks and ancillary film products.
  • Take Two: As cross-border film productions become more ambitious, it’s more important than ever to avoid legal, business and cultural disconnects that have plagued some projects. Lessons learned in how to overcome these hurdles, and key issues to expect in the future.
  • Insights from the Corner Office: Chinese and American studio heads share their experiences and predictions on how the world’s two biggest entertainment markets will converge, collaborate and compete.
  • The Future of Movie Going. This panel will examine a question on the mind of every studio executive and filmmaker: What will it take to keep up the box-office surge in China?  Online technology and mobile apps are part of the answer.

The day will be capped off with a Gala Dinner and awards presented by the Asia Society. Honorees include:

Zhang Yimou, China’s most critically acclaimed director, will be honored for his lifetime achievement. Zhang created award winners from his very first film, Red Sorghum (1987), received an Academy Award nomination for Ju Dou (1989) and cemented his international reputation with Raise the Red Lantern (1992.) His body of work continues to grow, with the recent release of Coming Home and the highly anticipated film, The Great Wall, a major Chinese-U.S. co-production.

Zhang Zhao, Chief Executive Officer of Le Vision Pictures, will be honored for his film industry leadership. Zhang founded Le Vision Pictures, one of the largest private-sector studios in China, and has steered its impressive growth in China and abroad. Le Vision has partnered with Legendary Entertainment, China Film Co. and Universal Pictures for The Great Wall, directed by fellow honoree Zhang Yimou. Le Vision is expanding its work with other U.S. studios as well as investing in online services and related media being developed by affiliate Letv.

The Beijing Film Academy will be honored for its role cultivating talented actors, directors and entrepreneurs who have elevated Chinese film and taken it global. BFA’s distinguished graduates include directors Zhang Yimou, Chen Kaige and Tian Zhuangzhuang and leading actors, including previous Film Summit honorees Zhao Wei and Huang Xiaoming, who are at the forefront of Chinese cinema and the growing bonds with Hollywood. BFA has encouraged those ties by opening up to international students and visiting professors. BFA will be represented at the Summit by Hou Guangming, Chairman of the Academy Council, senior administrators and faculty.

For more information and to register for the event, please click on this link.  I look forward to seeing you there!

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

“Grandmaster” Flashes to Top of China Chart


Follow me on Twitter @robcain or Sina Weibo @robcain, or connect with me on LinkedIn.Grandmaster

By Robert Cain for China Film Biz

January 15, 2012

Wong Kar-Wai’s Grandmaster, starring Tony Leung and Zhang Ziyi, opened with $25.8 million in its first six days in China, extending a record-smashing 7-week run during which at least one film every week has grossed $25 million or more at the Chinese box office. The film, an action-biopic about Bruce Lee’s legendary trainer and kung fu master Ip Man, beat out long-running hits CZ12 and Lost in Thailand last week to top the charts.

Director Wong, notorious for his budget and schedule overruns, out-did his tardiness record this time with a film that he first publicly announced all the way back in 2002. He released the picture’s first teaser trailer in summer, 2010, and pushed back several release dates as he tinkered with the film in post production. After missing his December 18th release date, he was reportedly still putting finishing touches on the film just hours before its eventual world premiere on January 6th. The first-week grosses would have been higher except that the film arrived at least a day late at many theaters.

Still, the wait was apparently worth it, as Grandmasters drew more than 4.5 million admissions and was critically well received, with reviewer James Marsh calling it “the best-looking martial arts film since Zhang Yimou’s Hero, and the most successful marriage of kung fu and classic romance since Crouching Tiger, Hidden Dragon.”

Box office week ending 1-13-13

In second place for the week, Jackie Chan’s action-comedy hit CZ12 added $13 million to solidifiy its standing as the mainland’s second-highest grossing Chinese language film ever after Lost in Thailand, with a 25-day cume of $127.1 million.

In its fifth week of release, Lost in Thailand fell 72 percent to $8.9 million, a surprisingly sharp drop that raises the question as to whether it can beat Avatar for China’s all-time box office record. Lost already holds the admissions record with over 38 million tickets sold, but Grandmaster’s dominant opening last week may just have ruined Lost in Thailand‘s chance to become the first Chinese film in the modern multiplex era to take the mainland’s all-time box office revenue crown. Lost needs another $17 million to achieve that distinction, and with Grandmaster stealing its thunder last week and with the James Bond pic Skyfall entering the picture next week, Lost in Thailand, the little ($4 million budgeted) picture that could, may not have enough steam left to push it over the top.

Skyfall‘s release on January 21 will bring an end to the nearly two month long SARFT blackout on major Hollywood releases. The Bond pic can be expected to perform well, though it will undoubtedly be hurt by SARFT’s two-and-a-half month delay in releasing the film, a lag which has allowed massive illicit pirating and online viewing that will cut into the film’s theatrical potential. Still, at least Skyfall won’t be subject to the simultaneous release with The Hobbit that many had feared; that picture has been held back in the PRC until late February.

There are numerous American film releases ahead with strong market potential, but don’t expect a repeat of 2012’s first half, when Hollywood seized a 63 percent share of the market. SARFT won’t be caught off guard this time, and will be doing everything it can to maintain the respectable appearance of a 50 percent or better market share for Chinese language movies.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

China Film Personality: Han Sanping


by Robert Cain for China Film Biz

March 7, 2012

This week Hollywood welcomes one of the Chinese film industry’s most important and influential players, Han Sanping (韓三平). As Chairman of the Chinese government/business mega-conglomerate China Film Group, Han is responsible for more financing, production, distribution, export and import of films than everyone else in China combined.

Han is visiting Los Angeles this week to meet with executives at several studios (Universal, Sony and Disney have been specifically mentioned in the industry trades) to seek out co-producing partners, and to consider requests for precious import quota slots. A couple of clients of mine are meeting Han this week to ask that he allow their blockbusters to screen in Chinese cineplexes.

There is no real Hollywood equivalent to Han, because he wears so many hats: producer, director, studio executive, government administrator, and mentor. If you took Jack Valenti, Lew Wasserman, and Steven Spielberg and rolled them into one, you’d begin to get an idea of Han’s power and influence in China. He has overseen the production and distribution of hundreds of movies and television series, he manages the Beijing Film Studios, and he has final greenlight authority on all co-productions with foreign partners.

Han is also widely recognized as a kingmaker who has nurtured the careers of such top directors as Chen Kaige, Zhang Yimou and Feng Xiaogang, and of many leading Chinese actors and actresses as well.

The kingmaker’s own career was nurtured and mentored by my new friend Liu Cheng. Han began producing movies nearly 20 years ago, which makes him the equivalent of an OG in China because there are few film veterans who can claim that sort of longevity. He has had a producing role on numerous Chinese blockbusters including Red Cliff (directed by John Woo), The Warlords (Peter Chan), Shaolin (Benny Chan) and Aftershock (Feng Xiaogang), and on such Hollywood films as Mission Impossible III and The Karate Kid. He also directed two of China’s highest grossing films of the past three years, the star-studded, Chinese Communist Party sponsored propaganda films The Founding of a Republic and The Beginning of the Great Revival.

Last year I helped Han to evaluate Hollywood visual effects companies for one of his films, and as a result I gained some access to his inner circle. I’ve heard that his trip this week has yielded at least one major surprise: there has been a marked negative shift in the major studios’ attitudes toward co-production with Chinese partners.

Apparently, in the wake of the Chinese government’s recent announcement regarding its relaxation of film import quotas and its enhancement of revenue sharing, the studios’ appetites have diminished for co-production as a means of boosting their China business. With enough quota slots now for each major studio to average 5 or 6 Chinese releases per year, and with their share of revenue now bumped up to 25 percent of box office gross, the Hollywood giants see little incentive to deal with the hassles of Chinese co-production. An unanticipated consequence of Beijing’s opening up of the Chinese market is that it may encourage less Hollywood cooperation, not more. Most of the studios have had trying experiences in the past with Chinese partners, and any incremental revenue they might theoretically earn by making movies in China isn’t considered sufficient compensation for the risks, creative restrictions, and headaches they would have to bear.

From my vantage point this is a good thing. China still wants access to Hollywood expertise and market clout, and the less the studios want to provide these things the more opportunity there will be for entrepreneurial American and other foreign companies. We may see more Chinese money begin to flow into high profile independent productions.

Han Sanping won’t have to concern himself with these issues for much longer; he’s nearing the mandatory retirement age of 60, and it’s widely anticipated that he will soon be leaving his post. Some speculate that Zhang Qiang, a younger protégée of Han’s, will step into the China Film Group chairman’s seat later this year.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

China Film Personality: Liu Cheng


By Robert Cain for China Film Biz

March 3, 2012

Last week I had the privilege of attending a luncheon event that yielded two most unexpected gifts. The first was a copy of a beautiful Chinese book, the Three-Character Primer of Film (电影三字经), given to me by the author himself, Mr. Liu Cheng (柳城). The second was the gift of meeting and beginning what I hope will be a long friendship with Mr. Liu, a warm and generous man who has inspired and influenced countless filmmakers in China and around the world.

The luncheon was part of a day-long celebration of the installation of Mr. Liu’s newly translated Three-Character Primer at the Motion Picture Academy’s Margaret Herrick Library in Beverly Hills. Written in admirably poetic style in just 900 classical Chinese characters, evocatively translated into English, and exquisitely bound on rice paper, the book is a marvel of economy and truthful insights about the art, craft and power of film.

Mr. Liu himself is a unique individual: accomplished and modest, powerful and gentle all at once. He was the man of the hour among an august group** of American and Chinese filmmakers, producers and industry executives, and the respect, admiration and affection for him in the room were as rich and piquant as the Chinese delicacies on the table.

A few choice morsels from his book:

In scene and storyline, less is more,
Stress what’s important, stick to the core.

.

For subject let obsession be your guide,
Release the yearning that lies deep inside.

.

Emotional truth is your glue and your weave,
Conflict comes from desires to which we cleave.

.

Liu Cheng’s career has encompassed teaching and leadership positions at the Beijing Film Academy, at the State Administration of Radio, Film and Television (SARFT), and currently at China’s national film channel, CCTV-6. He has been responsible for screenplays and movies at the highest levels in China’s industry, and counts among his friends film luminaries the world over.

The 50-plus commentaries and testimonials to his book reveal the impact he has had on global film industry leaders. A selection of quotes from these testimonials follows:

Zhang Yimou, filmmaker: “It amazes me that he was able to produce a major work using so few words and present a major truth so neatly… This is a book which is deceptively simple, but full of surprises. It seems effortless, but has been carved out through painful effort.”

Im Kwon Taek, filmmaker and the ‘Father of Korean film’: “I hereby recommend the Three-Character Primer of Film to all my Korean colleagues, as well to young people who hope to make a career in film. They will find the wisdom that the writer has acquired through a lifetime at filmmaking.”

Han Sanping, Chairman of China Film Group: “It would not be excessive to hail the Primer as a classic, not because of its three-character format, but because it has put the finger on the essence of the art of film as well as upholding an attitude to life itself.”

Jane Campion, filmmaker: “There is poetry in film, but Mr. Liu Cheng has written a poem on film itself, thus worthy of our attention.”

Janet Yang, Producer: “The Primer has a deceptively light touch. The writing must have been a very demanding job: one must be knowledgeable about film, one must master classical Chinese, and one must understand life.”

Jon Avnet, filmmaker, Chairman of the Motion Picture Association of America: “When I read Mr. Liu’s poetics, I felt he captured the essence of filmmaking. He has done it in rhyme, and he has done it concisely.”

J.J. Abrams, filmmaker: “As a fan of script writing and filmmaking books, this fantastic volume from across the globe has become one of my favorites. It is slight in page count only; the contents herein are critical truisms to which we all should adhere.”

David Seidler, screenwriter: “Please don’t read the Three-Character Primer of Film by Liu Cheng. If you do, you’ll become extremely wise in the ways of screenwriting, and I don’t need the competition.”

It is tempting for those of us in the west who have little insight into the inner workings of China’s film establishment to dismiss it as a faceless bureaucracy, an adversary standing in the way of our ambitions. But we can all take comfort that rare individuals like Liu Cheng, lettered, passionate about art, and optimistic about the future, are there in China, ready and willing to lend us a hand.

(**My table at lunch comprised a convivial group that included producer and former AMPAS President Sid Ganis, producer Janet Yang, Rhythm & Hues president John Hughes, visual effects master Doug Smith, writer-director Anna Chi, Wuxi Studios business development executive Rita Cahill, CCTV on-camera personality Maggie Wang, and Mr. Liu Cheng.)

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

China’s Box Office: Zhang Yimou’s ‘Flowers’ Still Smell Sweet


By Robert Cain for China Film Biz

December 27, 2011

For the week ending December 25th, 2011, Flowers of War and Flying Swords of Dragon Gate once again held the first and second spots in what was a very good but not great weekend at the Chinese box office.

The $71 million cumulative box office total may look good at first glance—indeed, it was the second best week of 2011 after Transformers 3’s opening week in July, and Flowers set a new single-week record for a Chinese film. But the total box office was actually up only 4 percent on a Chinese RMB basis compared with the same week last year. And considering that there are 45 percent more movie screens operating across China now than at this time last year, the past week’s box office looks downright unimpressive by comparison.

The problem may have been the oversaturation of Flowers and Flying Swords. Those two pictures grabbed up more than 80 percent of China’s 9,000 screens, leaving little else in the theaters for moviegoers who might have wished to see a different film. The strongest new opener, China Film Group’s romance Dear Enemy, managed just $6.5 million in sales, and the second best, The Allure of Tears, brought in $3.8 million. The rest of the field, a mix of 3 holdovers and 3 new releases, every one of them Chinese, brought in a grand total of $600,000.

Flowers of War will pass Beginning of the Great Revival this week to become the highest grossing Chinese film of 2011. With a couple more strong weekends it could possibly challenge Kung Fu Panda 2’s  $92 million China gross for the number two spot among all films released this year. But even if it does reach that lofty height, Flowers will only recoup a third or so of its negative cost in China. In order to break into the black it will have to gross, at minimum, $120 million in the international marketplace. This has only happened once before for a Chinese film, when Crouching Tiger, Hidden Dragon became a breakout hit in the United States back in 2001. Flowers of War lacks the compelling narrative, the exotic appeal, and the universally resonant themes that Crouching Tiger offered, so the possibility that Flowers might replicate those numbers seems remote.

The most important box office news this week is that China’s cumulative gross for the year has definitely crossed $2 billion, making it only the third country in history, after the U.S. and Japan, to reach that mark. Even more remarkably, it was only last year that China crossed the $1 billion mark for the first time ever. The above analysis notwithstanding, a $71 million box office haul in one week would be extraordinary anywhere in the world outside North America; it’s indicative of China’s incredible growth that the number fails to impress only by comparison against last year’s numbers.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

Dragons and Flowers and Swords, Oh My! A solid box office weekend in China


By Robert Cain for China Film Biz

December 19, 2011

The hotly anticipated box office duel between the Zhang Yimou/Christian Bale historical epic The Flowers of War and the Tsui Hark/Jet Li wuxia action pic Flying Swords of Dragon Gate came to a head last week with solid but not record-breaking results.

Both films did brisk business, with Flowers pulling in $23.9 million versus Flying Swords’ $22.3 million, but their producers were undoubtedly hoping for more.

With its reported $91 million budget, Flowers of War needs to do Avatar-sized numbers (that film cumed $208 million in China in 2009-10) to have a profitable theatrical run, but it failed even to exceed the opening of the $1.4 million budgeted Love is Not Blind, which took in $28.5 million in its opening week back in early November.

Although it’s too early to say for sure, it looks unlikely that Flowers will break $100 million in Chinese ticket sales, much less the $200 million it needs. Given its limited international prospects due to its dark and China-specific subject matter, Flowers could earn the unwelcome distinction of becoming the biggest money-loser by far in China this year.

Bona Group’s Flying Swords also slightly under-performed relative to expectations, but with its much lower $35 million budget and its stronger international appeal, it will be much more likely to recoup its investment. Both films will be pinning their hopes on a strong finish to 2011; as in many other territories, the last few weeks are traditionally among the best of the year in China.

Overall, box office totaled $50.8 million for the week ending December 18th, a 34 percent increase over the same week last year, when Let the Bullets Fly began its record-breaking run with a $27 million opening.  It was also a 122 percent jump from last week’s $22.8 million.

Flowers’ and Flying Swords’ respective box office performances made for the 4th and 5th best opening weekends of 2011, and together with The Adventures of Tintin they raised the count to 30 films that have grossed $20 million or more in China since January 1st.

By my tally, as of last Sunday the PRC’s total box office for 2011 now stands at $1.92 billion, with 13 more movie-going days to go. If Flowers and Swords hold up, as I expect they will, and if the year’s remaining 9 new releases do at least a fair amount of business, China will exceed $2 billion for the first time. Considering that total national box office was less than $200 million just 7 years ago, that would be an auspicious way for the film industry to enter the new year.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

China’s Third Affliction and the Soft Power of Film


By Robert Cain for China Film Biz

December 11, 2011

China’s increasing focus on exporting its values could ironically spell opportunity for foreign filmmakers. Read on to learn how and why.

Back in 2008 the term “three afflictions” began appearing in the Chinese press to describe the major impediments that hampered China’s national strength during the past century. These were foreign aggression, poverty stemming from a weak economy, and the demonization of China by ‘hateful’ and ‘ignorant’ Western nations.

As the press stories told it, the first affliction was conquered by Mao Zedong when he unified China under the Chinese Communist Party (CCP) and expelled the last of the foreign occupiers, the Japanese. The second was thrown off when Deng Xiaoping declared “to get rich is glorious” and engineered the great Chinese economic miracle that continues to the present day.

With the first two afflictions licked, the CCP has now set its sights on tackling the third, which can be summed up as poor global public opinion. Government leaders are concerned that China’s negative image stands in the way of its international influence, and they’ve decided to do something about it.

A major party initiative to project China’s ‘soft power’—that is, its ability to shape global events by promoting its cultural values around the world—was announced in November by President Hu Jintao when he delivered a policy speech urging the country’s artists and writers to “get closer to the realities and lives of the masses, to uphold the spiritual torch of the Chinese nationality, and to produce a greater number of excellent works that live up to the history, the times, and the people.”

And then he said something that must have jolted every Chinese artist and intellectual: “Let all flowers bloom together and let hundreds of schools contend.” This statement directly echoed Chairman Mao’s famous 1957 statement “Let a hundred flowers bloom and a hundred schools of thought contend to promote progress in the arts and sciences and a flourishing socialist culture in our land.”

OK, enough history; what does all of this mean for filmmakers?

For one thing, it means money. Lots of it. Hu and his colleagues in the CCP are anxious that Western culture and values have gone global in a way that Chinese culture and values have not, so they are investing billions in the effort to export China’s own value system, building the world’s most modern soundstages, production facilities, post production houses, animation houses, and the like. ‘Soft power’ and the cultural means to promote it have been elevated to the highest level of strategic importance. This is tantamount to a war of words and ideas with the West.

But it takes more than artillery to win a war, it takes skilled personnel to operate the machinery. Winning minds takes the ability to generate creative ideas and the skills of persuasion, capabilities that the CCP sorely lacks. The post-1949 Communists have never before had to compete in the marketplace of ideas because in China they own and control the market.

To compete on the global stage China will need skills that it hasn’t needed before. Skills like story development and screenwriting for international audiences. Sophistication in marketing, advertising and distribution to successfully circulate movies to the far-flung corners of the globe. Above all, the ability to understand what makes international filmgoers tick: why they go to see the movies they do and why they don’t go to see Chinese movies.

These skills and capabilities aren’t going to magically appear inside China; they will almost certainly need to be imported. China’s top filmmakers—skilled directors like Zhang Yimou and Feng Xiaogang—have generated huge and loyal followings inside the country, but they do hardly any business outside. For instance, Feng’s recent Chinese blockbuster melodrama Aftershock, which racked up nearly $100 million in ticket sales in China, earned a paltry $62,962 from its release in the U.S.

More than either side realizes, China needs Hollywood. And for Hollywood’s legions of skilled but underemployed writers, directors, producers, rotoscopers, sound editors, marketers, distributors and other talents, this means money and opportunity. If you’re one of these talents, China has a shortage of your kind of expertise, and piles of cash to pay you for it.

Will seizing these opportunities mean selling out your values and becoming a mouthpiece (喉舌) of the Communist Party? Hardly. The past decade’s two greatest examples of films that successfully promoted Chinese culture were made by outsiders pursuing their own self-interest.

Crouching Tiger, Hidden Dragon, directed by Taiwan’s (!!!) Ang Lee, swept the world with beautiful and sensuous images of China, earning $200 million worldwide (nearly $300 million in 2011 dollars). And Dreamworks Animation’s Kung Fu Panda films have been highly praised by CCP members for their ability to entertain audiences both inside and outside China while remaining faithful to traditional Confucian values. The two Panda films have earned $1.3 billion in worldwide box office receipts, and  Dreamworks’ Chairman Jeffrey Katzenberg is in talks to set up a $300 million joint venture to make films in China. Although Katzenberg and Lee have done a great deal of good for China, no one is accusing them of being Communist Party lackeys or sympathizers.

Foreign filmmakers have an additional advantage over their Chinese counterparts: freedom. Remember Hu Jintao’s exhortation to “let flowers bloom and hundreds of schools contend”? His intent must have been to send a chilling reminder to the Chinese that their ideas and artistic contributions are welcome only so long as they toe the line of political correctness and espouse the party’s message. When Mao Zedong launched the original “100 Flowers” campaign in 1957, he encouraged uninhibited public discourse to uncover a variety of views and solutions to national policy issues. After six weeks of this ‘experiment’ with freedom of expression, Mao swiftly repressed or executed those whose views offended him. While Chinese artists must be extremely cautious to avoid a similar fate, the worst that can happen to foreign filmmakers is that their projects will be rejected by the censors.

As David Bandurski put it in his recent New York Times article, “China’s ‘third affliction’ is a self-inflicted malady” that it cannot cure by diktat. “Governments in countries with cultural censorship may no longer fear criticism at the hands of their own country’s cultural work, but they must endure the ridicule of the whole world.” China’s best hope for improving its global image will be to enlist outsiders—storytelling mercenaries, or modern-day de Toquevilles, if you prefer—to shine a light on that nation’s best, brightest, and most universal values. If you’re a Hollywood filmmaker, there is no shame in telling stories that explore the wonders of China’s magnificent 5,000 year old culture. If you can make globally successful films while you’re at it, China and its leaders will thank you.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.

Beijing’s (Bloodless) Boxoffice Battle


By Robert Cain for China Film Biz

December 7, 2011

Here in the West we share a fundamental, almost genetic conviction that our democratic free market approach to business is superior to the East’s planned economy model (for thoughtful counterpoint to this Western notion, see Andy Stern’s excellent Wall Street Journal article from December 1st).

But sometimes having a Big Brother calling the shots can be an advantage. With a single, authoritarian party making major policy decisions, you get to avoid the perils of deadlocked senates, of do-nothing super committees, and even, sometimes, of the wrenching, blood-spattered forces of supply and demand.

And if you’re an enterprising Chinese producer with an axe to grind, having all-powerful government decision makers to settle a score can be a very good thing indeed.

The SARFT hammer of justice

The talk of the industry last week was the David vs. Goliath style battle between producer Zhang Weiping and the entire Chinese theatrical exhibition establishment. Zhang had demanded that theater owners across China raise their minimum ticket price from 35 yuan ($5.50) to 40 yuan ($6.29), and that they lower their after-tax share of ticket sales from 57 percent to 55.

Zhang was looking to protect the nearly $100 million that’s been invested in The Flowers of War, his latest collaboration with his mega-director partner Zhang Yimou. The film, which stars Christian Bale, is the costliest in Chinese history, and is set to open wide next week. Under the existing structure distributors receive only 39 percent of each dollar, or yuan, of ticket sales, and after the distributors’ cut producers get substantially less than that.

As Zhang Weiping put it, “For producers in China, the only way to get a return on investment is through ticket sales. Ancillary products do not sell well. Raising ticket rates could help keep movies from being fast food and junk food.”

An increasingly disproportionate share of revenues has gone to theater owners, who have been steadily increasing their slice of the box office pie, along with the rents they charge to the companies that operate their theaters.

But in swift and stunning fashion last week, China’s State Administration of Radio Film and Television (SARFT) ended the brewing battle by hammering out a decree with far-reaching effects for the industry.  With its jazzily titled document “On Promoting the Coordinated Development of Movie Making, Publishing and Releasing,” SARFT shoved aside free market economics and proclaimed these new rules:

  • “In order to balance the benefits of distribution between production companies, distributors and exhibitors, referring to international conventions, cinemas can get no more than 50% of the box-office revenue in the first run in the future.”
  • “In order to promote the sustainable development of cinema construction, we suggest the annual property rent for cinemas should be less than 15% of the annual box-office revenue.”

The first rule was obviously a major victory for film producers and distributors. As Zhang Weiping rightly pointed out, theatrical revenue is the lifeblood of Chinese producers. The 7 point bump in their share will spell the difference between profit and loss for many Chinese films.

The second rule was aimed squarely at the real estate developers and theater chain owners who lease their cinemas to third-party operators. Rents had been on a steady climb, with rising profitability fueling an exuberant binge of cinema building; China’s total screen count has nearly doubled since 2009 to around 8,900. With this second ruling SARFT’s intent seems to be to tamp down investment and cool off the rate of new construction.

No mention was made of ticket prices, which will presumably be left to the discretion of theater operators.

Theoretically this new set of rules should benefit non-Chinese producers and distributors too, but at this point it’s unclear—and perhaps unlikely—that any of the 7 extra points will be passed along to them.

The long-term effects of these rules remain to be seen, but it seems a safe bet that curtailed theater profits will result in a diminished rate of new theater openings, and that China’s blazing domestic box office growth will slow as well.

Given these dramatic recent developments, now may be a good time for Hollywood to amp up its own campaign for an increased share of the revenues its movies generate in China.  After all, if a single producer can motivate China’s movie czars to make dramatic changes for the better, then certainly the world’s most powerful media companies can do the same.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.